Thoughts to begin the week...
Uneasiness is the feeling that most describes where capital and agriculture markets are at the moment, despite ongoing positive economic news.
Last week, the April CPI print of 4.9% marked the 10th straight month where the pace of increases slowed. Even core CPI improved m/m to 5.5%. However ongoing anxiety about the U.S. debt ceiling, confusion about regional banks and the threat of regulation, ongoing recession fears and risk of a discontinuation of the Black Seas Grain Initiative (on May 18th) dominated the narrative. (The latter apparently has been extended for 60 days per Russian media and Politico.)
Ironically, the continued drop in crude oil (to $70.13) and fertilizer prices (a very large expense for U.S. corn farmers) will help consumer and grower wallets.
This week, we are paying attention to numerous Federal Reserve governor speeches (especially Bostic, Kashkari and Cook on Monday, and Williams and Chair Powell on Friday), various economic reports throughout the week (retail sales, industrial production, housing/building statistics, jobless claims, Philadelphia Fed Manufacturing).
We are also watching for Home Depot, Walmart and Target earnings reports as a check on how inflation is impacting the U.S. consumer, and Deere’s earnings report for a check on farm and industrial equipment demand.
The Watch List
- Black Seas Grain Deal
A Politico story out Friday night suggested that the grain deal has been extended for 60 days, avoiding the May 18, 2023 expiration date.
- China Grain Demand
Lots of uncertainty happening here, with private exporters recently reporting the cancellation of U.S. corn sales to China, and a 9.8% yr/yr drop in soybean imports by China (from all exporters) during April. Although through the first four months of 2023, China imported 30.29 MMT of soybeans, up 6.8% from the same period last year. Of interest, China’s total imports (all products) fell 7.9% yr./yr. in April amid weak domestic demand, lower commodity prices, and a stronger dollar, while exports rose 8.5% versus April 2022, down from 14.8% growth the previous month.
- Debt Ceiling
As of Sunday evening (May 14, 2023), CNN reported that a “top Treasury offices said that debt limit talks have been constructive” and the President Biden “has expressed optimism for a deal. Stayed tuned.
- The Consumer
All with this week’s Retail Sales report on Tuesday, earnings reports from Walmart, Home Depot, and Target should shed light on how inflation is impacting the U.S. consumer.
Week Ahead & Upcoming Events
May 15 USDA Weekly Grain Inspections Report (morning) and Crop Progress Report (4pm EST); Agri-Pulse webinar on Farm Bill (noon); NY Empire State Manufacturing Index;
May 16 Home Depot earnings; May Housing Market Index; April Retail Sales, USDA Cotton, Oil Crops, Feed, Rice, & Wheat Outlook
May 17 Target earnings; April Residential Construction; House Oversight and Accountability subcommittee hearing on EPA Tailpipe Emissions Rules and Rapid Electric Vehicle Transition (2pm); Senate Agriculture subcommittee hearing on rural broadband (3pm)
May 18 Walmart earnings; USDA Weekly Export Sales (8:30am); The Conference Board Leading Economic Index for April; Philadelphia Fed Manufacturing Index; Jobless Claims; Expiration date for Black Seas Grain Deal (unless reauthorized)
May 19 Deere (DE) earnings; Cattle on Feed (3pm EST)
May 23 to 24 Kansas City Federal Reserve 2023 Agricultural Symposium: The Changing Geography of Agricultural Production
June 20 to 21 Wall Street Journal’s annual Global Food Forum, Chicago, IL.
Note: this is not a complete listing of weekly economic reports
Numbers of Interest
$274 U.S. Mother’s Day spending is expected to reach an record $35.7 billion this year = average household spending of $274, up 11.4% from $246 in 2022. (National Retail Federation.)
+7.1% Supermarket prices fell 0.3% according to the April CPI report, the first such decline since 2020, however, the cost of eating at home is still up 7.1% over April 2022.
31%YTD rise in sugar prices driven by heightened concerns over tighter global availabilities in the 2022/23 season after further downward revisions to the production forecasts for India and China, along with lower-than-earlier-expected outputs in Thailand and the European Union. (Source: FAO)
+8.5% China’s April 2023 export growth, down from 14.8% in March, adding signs of softness in global trade as spending slows in the U.S. and Europe. (WSJ)
$371,200 Median sales price of existing U.S. single-family home (nationally) in 1Q 2023, down 0.2% vs. year ago. San Francisco prices fell 14.5%. (WSJ)
$6 billion Offer price for the Washington Commanders (formerly the Washington Redskins) football team.
Kenneth Scott Zuckerberg is Lead Industry Analyst, Farm Supply & Biofuels, CoBank.
